Ella 
In early European trading on Tuesday, USD/CHF extended its gains to around 0.8870, thanks to the strength of the U.S. dollar. Markets may turn cautious ahead of Wednesday’s Fed rate decision.
The Federal Reserve will hold a monetary policy meeting this week and is expected to keep interest rates unchanged. However, the market generally expects the Fed to begin easing policy at its September meeting. With inflation slowing faster than expected in June, the market has priced in a nearly 64% chance of three interest rate cuts by the Federal Reserve in September, November and December this year, according to CME FedWatch data.
Jacob Channel, chief economist at LendingTree, said: “It currently looks like the Fed may cut interest rates slightly by 25 basis points in September. If things go well, we may even see two more 25 basis point interest rate cuts before the end of 2024. “Traders will get more clues about the outlook for interest rates from Fed Chairman Jerome Powell’s speech at the press conference. If Fed officials make dovish comments, it could drag the dollar lower and limit the pair’s upside.
In Switzerland, uncertainty over the trajectory of the U.S. presidential campaign, concerns about China’s economic slowdown and ongoing geopolitical tensions in the Middle East could boost safe-haven flows, benefiting the Swiss franc. Looking ahead, the Swiss KOF leading indicator for July will be announced on Tuesday and the Swiss Consumer Price Index (CPI) for June will be released on Friday, with an annual increase of 1.3% expected.
As long as the Swiss National Bank (SNB) does not proactively change the direction of interest rates, traders will be cautious in betting on a stronger Swiss franc. The chances of further interest rate cuts in September are now close to 90%, compared with around 37% two weeks ago.
